SMEs and public sector tenders

What do the latest changes mean for your business?

Small and medium sized enterprises (SMEs) can feel locked out of government tenders by the Pre-Qualification Questionnaire (PQQ) requirements. The Cabinet Office wants this to change and over the last year they’ve taken some steps to do just that. In this article we’re going to take a look at what they’ve recommended and how that could make things easier for your business and applying for public sector tenders.

There are a few issues that face SMEs when public sector tendering. The first is that public sector departments are risk averse because of limited budgets and competing political demands. No authority wants to hire a small company and discover it can’t fulfil the contract. To avoid this UK government tenders focus on compliance and financial robustness, favouring established companies.

Worse, SMEs can be inadvertently filtered out of the process by asking far too much of them in compliance requirements or in the scale of the contract. The Cabinet Office is currently recommending that contracting authorities split their contracts into separate micro-lots for each required service. This ought to help SMEs by reducing the size of each contract and allowing them to take advantage of their specialist expertise that a large company trying to do everything might not possess.

The Finance Problem

Public sector tendering often requires demonstrating financial stability backed up with plenty of financial data, which can be a problem for many SMEs. They may simply have not been operating long enough to meet those requirements and probably lack the required level of insurance. They may not have enough staff to collate all the information they need.

The new guidelines encourage procurers to allow for alternative forms of financial information. UK government tenders and their contracting authorities are being encouraged to be more open about exactly what details are necessary.

Changes in “Technical and Professional Capacity”

The last thing any local authority wants is to be made complicit in some awful pollution or racism scandal by one of their contractors. So they’ve tended to put equal opportunities, health and safety and environmental compliance into the “technical or professional capacity” section of the PQQ. It can be expensive to prove that an SME is in compliance with all these rules.

The Cabinet Office has asked contracting authorities to remember that this section should only be about previous similar contracts, quality control and technical staff. This doesn’t mean that the compliance issues are now irrelevant: instead, the local authority is likely to use the “eligibility” section to ascertain whether the bidder has a record of dumping hydrogen sulphide into municipal swimming pools. The hope is that the move will draw a much clearer distinction between mandatory and discretionary grounds for disqualification, helping SMEs. If a contracting authority isn’t clear about where the line is, ask!

Big Changes in Best Practice

The Cabinet Office has issued a model PQQ in line with all these new changes which government departments are now required to use. By only including the minimum requirements of the regulations, the hope is that the bar won’t be set too high for SMEs to consider. Better still for SMEs, the Cabinet Office has a “mystery shopper” report. Suppliers are being encouraged to report poor procurement practices and unclear tenders.

The new guidelines for PQQs all aim to make the process simpler and cheaper for SMEs to engage in, and provide more outlets for them to question decisions or get feedback. Not all of the potential hurdles have disappeared, but they have got lower.

We would love to hear about how the changes have affected your business so what do you think?